Fuel Tax Evasion Highlights, March 1995

Volume 4, Number 1 March 1995

Lawrence Iorizzo, key figure in the NY bootleg gasoline market in the 1980's who turned government informant and was subsequently booted out of the witness protection program and is now wanted by Texas officials, is interviewed. The New Yorker, Talk of the Town, 11/14/94

Marat Balagula pled guilty to conspiring to evade $85 million in federal gasoline taxes on nearly one billion gallons of fuel sold in the NY area between 1983-88. The surprise plea came Oct. 18, a month before he and 7 others were to begin trial. Balagula is already serving a 10-year sentence for similar bootlegging. On Oct. 27, Joseph A. Macchia and his sons Lawrence, George and Joseph L. pled guilty to their role in the scheme. On Nov. 4, John Barberio was the last to plead guilty. Michael Varzar had pled guilty earlier. An eighth defendant, Viktor Batuner, is a fugitive. Newsday, 10/24/94, 11/2/94; Dept. of Justice Press Release, 11/4/94

Eugene Slusker pled guilty in U.S. District Court in Columbus, Ohio to a diesel conspiracy that resulted in a federal tax loss of over $88,000 and a loss of over $117,000 to Ohio during 6 months in 1990. Slusker, using the alias Semyan Altman and doing business as Accurate Tank Testing, Inc., used a false Form 637 to purchase over 587,00 gallons of untaxed diesel fuel which was then sold to numerous truck stops throughout Ohio, tax included. Co-defendant, Roman Kalika pleaded not guilty to federal tax evasion charges. The IRS Criminal Investigation Div. and the Ohio Dept. of Taxation investigated the case. Justice Dept. Press Release 9/30/94; Dayton Daily News 10/3/94; Columbus Dispatch, 12/24/94

The worldwide activities of Russian organized crime and its ability to bilk companies, governments and individuals out of billions of dollars through sophisticated fraud and theft schemes is described in two recent articles. Wall Street Journal, 12/22/94; Atlantic Monthly, 6/94

The Wisconsin Dept. of Justice has charged Patrick S. Gedig and Paul C. Kramer with misappropriating nearly $1 million in motor fuel taxes during 1990. At the time, Gedig was president of United Petroleum, Milwaukee, and Kramer ran Ohio Fuel and Supply, Big Bend. Wisconsin State Journal, 11/1/94

The work of Charles Hurchalla in helping to expose a massive fuel tax scam masterminded by the Russian mob and involving the La Cosa Nostra is described in a recent article. Philadelphia Magazine, 10/94

Court documents filed by federal authorities in NJ name John Gotti as an unindicted co-conspirator in organized crime efforts to dominate the bootleg motor fuel industry in the NY metropolitan area. The disclosure came on the eve of the trial of Anthony (Fat Tony) Morelli, allegedly a capo in the Gambino crime family, and Gregory Federico, owner of Capitol Fuel Service of Cranford and Igor (Little Igor) Roizman, a Russian emigre. To date, 20 persons have been prosecuted on charges growing out of the Operation Red Daisy investigation conducted jointly by the FBI, IRS, DOT Office of Inspector General, NJ Div. of Taxation and PA Dept. of Revenue. Newark Star Ledger, 12/5 and 12/16/94

Jerry Radney owner of Cody's, a fuel distribution service, and Valdosta Truck Stop, in Lowndes County, GA, his wife Cheryl Radney, and Earl Renner, Julius Meyer, and Jacqueline Denniston, officials of Southern States Oil and Gas, Inc., of Atlanta, were indicted of conspiring to defraud the U.S. by failing to pay fuel excise taxes from 1989-1991. According to the indictment, Renner, Meyer and Denniston set up a phony Greek Shipping company called Halcoussis Shipping Lines. It is alleged that Renner, Meyer and Denniston then caused Southern States to purchase truckloads and bargeloads of tax-free diesel fuel and used transformer oil from suppliers and utility companies using false documents showing the fuel was destined for Halcoussis. Allegedly Southern States then delivered the blended fuel to Cody's which in turn sold it to retailers throughout the Southeast at a tax included price. Justice Dept. News Release, 5/25/94; Oil Week, 5/30/94;

Norma Latham of Porter, TX, and James Gardner of Humble, TX, were convicted in a motor fuel scheme which defrauded the State of Texas in excess of $475,000. Press Release, Travis County D.A.

The State of Maryland filed tax assessments of over $300,000 against two trucking companies and a fuel oil distribution firm for using home heating oil in trucks. Six other companies are expected to receive assessments. The assessments stem from a joint investigation by the MD Comptroller's Office and the EPA. The EPA notice of violation listed Johnny Joe Brice, JJB Oil; Clement Miller II, Canton Oil; Reginald F. Hedgeman, Reggie's Fuel, Ronald A. Tyner, Tyner Trucking, David Rice Jr., Rice Trucking, Solomon Shelby, S&S Trucking -- all of Baltimore and E. King, King's Trucking, of Laurel. The IRS is also expected to investigate the companies. Baltimore Sun 6/10/94; U.S. Oil Week, 6/20/94; Washington Times, 6/10/94

Jerry Dabrusky, Lincoln, NE was sentenced to 90 days in jail after pleading no contest to using untaxed fuel in highway vehicles. Lincoln Star, 1/14/95

Bootleg gasoline sales may be costing Jacksonville, FL, millions of dollars annually in local option fuel taxes. Jacksonville Times-Union

Gary Lazar and Divine Grace Lazar, Anaheim Hills, CA, pled no contest to 54 criminal counts, including failing to pay more than $24 million in CA taxes, illegally disposing of hazardous waste, and selling substandard gas in connection with their 200 gas stations. Under a plea agreement they are to be sentenced to no less than 5 nor more than 8 years in State prison. The amount of restitution could be as much as $800 million. The Lazars operated California Target Enterprises, Alameda Management Co., Inc., Pronto Marketing Co., P&M Service Stations, and Challenge Marketing. The firms are pending trial, as are attorney Douglas T. Richardson and accountants Neil Balzar and Mario Rene Solares. The investigation was conducted by the L.A. District Attorney's Environmental Crimes/OSHA Div., the CA Board of Equalization, the Dept. of Special Taxes and Operations, the Dept. of Food and Agriculture Div.of Measurement Standards, the CA EPA and the CA Air Resources Board. News Release, L.A. District Attorney, 9/26/94; L.A. Times, 9/27/94

Joseph Yosi Ezra and Leah Isaac of Beverly Hills pleaded guilty U.S. District Court to felony tax evasion in a diesel fuel scheme. Ezra pleaded guilty to evading $1.4 million and Isaac pleaded guilty to evading $570,000 between March and June, 1992. Operating as "Eurika Distribution, Inc., they purchased over 10 million gallons of fuel tax-free using fraudulent documents. They have agreed to pay nearly $2 million in restitution. Maximum sentences are 5 years in prison and a $250,000 fine. Justice Dept. News Release, 10/18/94

FUEL FRAUD HOTLINE ESTABLISHED IN TENNESSEE

Revenue Department special agents who are trained in investigating fuel tax fraud cases staff the Hotline. 1-800-372-8389 (1-800 FRAUD TX)

DYED DIESEL ENFORCEMENT

Truckers are warned not to run on red diesel and urged to do visual checks when refueling.

Transport Topics, 10/24/94

The Mississippi Depts. of Transportation, Agriculture and Commerce, and the State Tax Commission joined with the IRS in "Operation Red Rover" on Nov. 7-9 to check for untaxed diesel. IRS News Release, 11/7/94

On Nov. 23, 1994, NBC Nightly News aired a segment on fuel tax fraud and showing on-road dyed diesel enforcement in North Carolina.

WANT TO KNOW MORE?

For more information or updates to the mailing list, call Linda Morris, (202)366-0570, FHWA (HPTS), 400 7th Street, SW, Washington, DC 20590.

FAX back address corrections or additions to: 202-366-7696